Vincent and Robert Tchenguiz, two of London’s best known entrepreneurs, have
been arrested in a dramatic swoop by the Serious Fraud Office and the City
of London Police.

The colourful London-based brothers are currently being questioned by enforcement officers in connection with the collapse of Kaupthing, the Icelandic bank.

In a joint statement Robert and Vincent Tchenguiz said: “We were arrested earlier this morning and are being questioned with regard to matters relating to our relationship with Kaupthing Bank.

"Both of us are cooperating fully with the investigation and are confident that, once concluded, we will be cleared of any allegationof wrongdoing.”

Robert Tchenguiz was Kaupthing’s biggest client with loans of almost £1.4bn, which were used to fund his investments in some of Britain’s biggest companies - including the restaurant and pub groups Slug & Lettuce, Yates, Mitchells & Butlers and La Tasca, plus holdings in J Sainsbury.

The SFO said in a statement that a total of seven men were arrested in a co-ordinated raid of offices and homes in London, while a further two were arrested in Iceland.

A source within Mr Tchenguiz's Mayfair headquarters told The Daily Telegraph: “The police arrived at 6.30am. They went straight up to the offices and have been there ever since. They said they will be there all day and into the night, until their warrant runs out.”

A woman who works in the building but not for the Tchenguiz brothers said: “I turned up for work and wasn’t allowed in. The lifts are blocked by officers and everyone is being sent home - no one is allowed in or out.”

Kaupthing was one of three Icelandic banks that failed at the height of the credit crunch in October 2008. Its implosion was one of the most dramatic moments of the banking crisis. It left 160,000 British savers unable to access their money. The UK Treasury paid £2.5bn to bail out the UK customers of the bank’s high-interest Edge internet accounts and is still waiting to be repaid.

Total claims against Kaupthing are equivalent to about five times Iceland’s gross domestic product.

The SFO and Icelandic officials then started an investigation to ascertain whether “substantial value” was extracted from the bank “in the weeks and days before it collapsed”.

The investigators are also probing claims of market abuse, excessive loans to related parties and fraud.

Robert Tchenguiz was not just Kaupthing’s biggest client but also a board member of its largest shareholder, an investment company called Exista.

A report by the Icelandic authorities found Kaupthing’s exposure to Robert Tchenguiz's was against the bank’s rules.

The brothers have fought back with legal claims against Kaupthing alleging that the bank’s former management duped them into putting up millions of pounds of assets as collateral without disclosing the parlous state of Kaupthing’s solvency.